Highlights
Results are moderately solid for the monthly 3-year note auction, where coverage, at 2.83, was just middling but the bidding was tight, pulling down the high yield to the awarded 1.657 percent, about 0.3 basis points below the 11:30 bid. End investor demand was fairly strong, with non-dealers taking down 61 percent of the $24 billion offering, about average for this year but well above the long term average of 55 percent. The 1.657 percent high yield was 22.4 basis points above last month's rate and the highest awarded for the 3-year since April 2010.

Definition
Treasury notes are sold at regularly scheduled public auctions. The competitive bids at these auctions determine the interest rate paid on each Treasury note issue. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the bills, resell the bills to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers but that number dropped sharply during the 2008 financial crisis as some were merged into other firms or went bankrupt. The Fed has been rebuilding that number regularly and the latest list can be found here. The 3-year notes are announced around the first week of the month (usually on Thursday) and then auctioned the following week. In all cases, the 3-year notes are issued (settled) on the 15th of the month, unless it falls on a weekend or holiday, and then they are issued on the next business day. (Department of the Treasury)
Why Investors Care

Data Source: Haver Analytics

When the 3-year note is higher
than the federal funds rate, it
usually suggests that bond
investors are expecting the
federal funds rate to rise.
Conversely, when the 3-year
note
is lower than the fed funds
rate,
it suggests that investors are
anticipating a rate cut -- or
at
least some stability in policy.
This chart shows the average
monthly 3-year note yield, not
the latest auction results.Data Source: Haver Analytics